First Direct Tracker +0.49% or +0.79% - Which to choose?

lju

I have to decide tomorrow which of the above trackers to choose.

The +0.49 has a fee of £999 and the +0.79 is fee free.

The current outstanding mortgage is £161k on a property conservatively valued at £210k, and yes this is realistic!

The original mortgage was taken out over 30 years, 5 years ago, but due to over payments has around 18 years left.

By my crude calculations I would have to keep the 0.49 tracker for around two years before the difference in the £999 fee is recouped, due to this I am leaning towards the 0.79 tracker, as I will fix it in the near future if rates drop.

Any thoughts or advice from anyone?

BaileyB

And the 2 years would be at 4.5% if they keep going lower it could take a few extrra months to get that back.

lisyloo

You are right, it's about 2 years.

If you think you may fix then the 0.79% seems more flexible.

However I am not personally convinced that fixed rates will drop.
Fixed rates will not necessarily go down with BOE rates as they have to reflect rates over a long period, plus currently they are somewhat higher than trackers.

So I'm not convinced about your strategy.
However if you want the flexibility to go for it, then the higher rate seems better.

eslick

dont forget that the 0.49 isnt just 999 there are valuation fee of 99 or more and the final payment fee of 149 as well.

We to are looking at this thinking we will go for the 0.79 one as there are no fees at all and if the rates come down as predicted over the next year or so and lending happens between banks there might be better deals around that you can move to. Though 0.49 is also an excellent deal for the long term.

Locoblade

If you download my spreadsheet it can answer your "break even" month fairly accurately, although it doesnt currently take into consideration the exit fee in that equation so in reality it will be about 6 months longer than indicated.

Personally, Ive gone with the +0.49% deal, I was, like you, originally intending on tracking for a few months then jumping onto a fix so was planning to take the no fees option, but like lisyloo I'm no longer convinced that fixed rates are going to drop significantly in the next year or two, so am now looking at this in the longer term so I'll go with the lower rate with fee, as my break even is about 25 months.

With the 0.49% deal, the worse case scenario for me is if in a year's time there are much better fixed deals out there, in which case I'll have lost about £500 overall if I switch. If I look at it the other way and go with the no fees, in worse case I might need to stay on the deal for 5 years (due to house price plummeting me into lower/negative equity or no better deals out there), in which case I would be over £1500 worse off by that time compared to the 0.49% rate.

Kez100

We are on +0.69 with the Abbey and have been for some years. We also may fix but I have reservations as the market will know why rates have dropped (if they do) and take a longer term view for pricing of fixed products. Still, if it happens it happens and with a BOE tracker there is that flexibility.

lju

Thanks for the advice so far - lots to think about!

Locoblade

By the way, remember that in order to break even ASAP, you need to pay the lower rate mortgage as if it was the higher rate, i.e. overpay it by the difference in the monthly premiums. If you don't, it can take about 5 years for the capital on the high fee, low rate loan to drop below the level of the no fees loan.

Gorgeous_George

lju wrote: »

I have to decide tomorrow which of the above trackers to choose.

The +0.49 has a fee of £999 and the +0.79 is fee free.

The current outstanding mortgage is £161k on a property conservatively valued at £210k, and yes this is realistic!

The original mortgage was taken out over 30 years, 5 years ago, but due to over payments has around 18 years left.

By my crude calculations I would have to keep the 0.49 tracker for around two years before the difference in the £999 fee is recouped, due to this I am leaning towards the 0.79 tracker, as I will fix it in the near future if rates drop.

Any thoughts or advice from anyone?

How long do those rates apply? Is it a lifetime tracker of for fixed period?

I'll assume 5 years for now and I'll add the £999 fee to the +0.49% mortgage.

After 5 years you will owe £143,476 having paid £946.09 for the +.49% tracker.

After 5 years you will owe £143,266 having paid £968.59 for the +0.79% trackers respectively.

That makes the +0.49% a better choice (you owe £210 more but have saved £22.50 for 60 months = £1,350).

Take the +0.45% tracker and overpay it by £22.50 and you should knock 14 months off the 25 year term.

(I used a 7.0% rate for both deals after the fixed term).

GG

lju

The rates are lifetime.

lisyloo

I have a similar mortgage and I've decided to take it (with a view to this being for the whole term).
At the moment it's very competitive and I don't see that changing short term.
Obviously longer term no-one knows but you have to remeber that if you swicth to another deal that there will most likely be fees involved - application, valuation, legal etc. and these have been going up, so it needs to be significantly better to cover the fees.

I'm taking the view that mine is for term, but there is no guarantee either way about future deals.
I just don't see deals improving or fees for quite some time.
The current economic mess will take at least a few years to unravel.